The economy is picking up, fuelled by strengthening domestic demand, including post-earthquake reconstruction. Growth in 2013 and 2014 should be bolstered by residential and business investment but may be tempered by the strong exchange rate, fiscal consolidation and, in 2013, temporary drought effects. Firming housing markets and gradually rising employment will support household spending growth. Inflation is projected to remain within the target range over the projection but will rise from low levels as earthquake rebuilding absorbs excess capacity.
Macro-prudential and micro-prudential policies need to address financial system risks from the housing market, while monetary tightening should begin next year before inflation pressures become pronounced. Large foreign debt exposures highlight the need to restore fiscal sustainability through fiscal consolidation, as planned, combined with structural reforms to boost private saving and longterm growth.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.
Link to eXplorer tool
Link to Excel of selected projections (flash file) and dotStat
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